HE 

2757 
1916 

T7 


BANCROFT 
LIBRARY 

o 

THE  LIBRARY 

OF 

THE  UNIVERSITY 
OF  CALIFORNIA 


Railway  Regulation  and 
Locomotor  Ataxia  \ 


BY 


FRANK  ^RUMBULL 


Railway  Regulation  and 
Locomotor  Ataxia 


AN    ADDBESS 

BY 

FRANK  ^TRUMBULL 

CHAIRMAN,  RAILWAY  EXECUTIVES'  ADVISORY  COMMITTEE 


BEFORE  THE  TWENTY-THIRD 
ANNUAL  CONVENTION  OF  THE 
NATIONAL  HAY  ASSOCIATION  AT 
CEDAR  POINT,  OHIO.  JULY  12,  1916 


NEW   YORK 

61  BEOADWAY 

1916 


The  National  Hay  Association  has  a  member- 
ship of  about  one  thousand  representative  hay 
dealers  of  the  country.  In  1915  the  hay  crop 
was  the  second  most  valuable  crop  produced  in 
this  country,  aggregating  over  one  hundred 
million  tons,  carrying  a  value  to  the  farmers  of 
over  one  billion  dollars,  and  the  1916  crop  is 
expected  to  be  as  large. 


Railway  Regulation  and  p 

Locomotor  Ataxia 

I  shall  not  weary  you  with  figures  or  with 
platitudes  about  what  you  do  for  the  railroads  or 
what  they  do  for  you.  The  fact  that  you  have 
invited  a  representative  of  the  railroads  to  address 
you  evidences  sufficiently  the  mutual  welfare  and 
regard  of  shippers  and  carriers.  Neither  shall  I 
apologize  for  the  railroads.  There  has  been  a  great 
deal  of  critical  comment  about  exceptional  instances 
of  railway  administration,  but  if  you  will  put  it  all 
together  you  will  find  it  relates  to  less  than  10$  of 
the  mileage  of  the  country,  and  that  it  has  very 
much  exceeded  in  volume  and  sound  the  praise 
bestowed  upon  the  other  90$. 

Railway  administration  of  today  in  this  country 
is  as  honest  as  any  other  business.  Notwithstand- 
ing this,  railway  directors  and  officials  accept  the 
principle  of  regulation  because  railway  companies 
are  public  service  corporations.  Discriminations 
and  unreasonable  practices  by  such  corporations 
are  and  ought  to  be  forbidden  by  law.  Discrimi- 
nations by  individual  states  against  the  commerce 
of  other  states  and  unreasonable  requirements  ought 
also  to  be  done  away  with  by  some  better  method 
than  tedious  litigation.  Obviously,  any  adequate 
scheme  of  regulation  ought  to  deal  not  with  10$  of 
the  roads  or  with  90$  but  with  all  of  them,  and  no 
regulation  can  be  adequate  that  is  not  unified  and 
consistent. 

I  might  entertain  you  with  a  long  history  of 
various  attempts  at  regulation,  commencing  with 
the  so-called  "  Granger  Laws,"  followed  later  by 
the  Interstate  Commerce  Law,  enacted  twenty-nine 
years  ago,  and  both  in  turn  followed  by  hundreds 

[3] 


upon  hundreds  of  statutes  enacted  by  federal  and 
state  governments.  But  it  is  sufficient  for  this 
occasion  to  say  that  these  endeavors,  due  to  a 
variety  of  motives,  have,  after  establishing  general 
principles,  all  been  of  a  piece-meal  and  patch-work 
character  ;  court  plasters,  not  blood  remedies. 
Railway  legislation  has  been  more  conspicuous  for 
quantity  than  for  quality,  and  "  legislation "  and 
"  regulation  "  are  not  synonymous  terms. 

PRINCIPLES   EOR   RATE    MAKING 

It  is  true  that  much  progress  has  been  made. 
For  example,  in  the  so-called  Eastern  Rate  Case 
the  Interstate  Commerce  Commission  made,  in 
December,  1914,  the  following  declarations  of 
principle : 

That  there  is  in  this  country  a  fundamental  need  of 
adequate  transportation  facilities. 

That  such  facilities  during  the  continuance  of  present 
economic  conditions  can  only  be  had  by  means  of  private 
capital,  combined  with  private  enterprise. 

That  private  capital  can  only  be  obtained  by  the  hope 
and  realization  of  fair  and  reasonable  return. 

That  to  produce  such  return,  freight  rates  may  be  raised, 
when  it  is  shown  that  existing  rates  as  a  whole  (considered 
regionally  in  this  case)  yield  inadequate  revenue,  and  that 
the  higher  rates  proposed  would  be  reasonable. 

That  such  reasonable  passenger  fares  may  be  charged  as 
will  yield  a  fair  return  on  the  property  devoted  to  passenger 
use,  and  further — that  in  general  each  class  of  service, 
including  the  mail  and  express,  should  contribute  its  just 
proportion  to  the  total  economic  cost  of  operation. 

That  in  determining  reasonable  rates,  interest  upon  rail- 
way debt  is  not  a  factor  and  will  be  discarded.  This  has 
mightily  clarified  a  thing  about  which  there  has  been  much 
confusion  of  thought  and  even  more  confusion  of  tongues. 
The  fact  is  that  bonds  and  stocks  indicate  only  the  ownership 
of  property,  and  are  not  the  property  itself  which  is  used  by 
the  public.  This  is  simply  a  corollary  to  the  long  established 
principle  that  if  railway  companies  take  private  property  for 
public  use,  they  must  pay  its  reasonable  value,  regardless  of 
how  the  previous  owner  acquired  it  or  paid  for  it. 

However,  almost  immediately  after  this  decision 
was  handed  down,  one  state  made  an  order  reduc- 


ing  rates  which,  if  sustained  by  the  courts,  will 
take  away  several  million  dollars  per  annum  of 
the  benefits  derived  at  Washington.  Various  state 
rates  and  practices  could  not  be  changed  to  con- 
form to  the  recommendations  of  the  Commission ; 
payments  by  the  Post  Office  Department  were  still 
outside  the  Commission's  jurisdiction ;  various 
tribunals  (sometimes  both  the  legislature  and  the 
commission  of  a  single  state)  were  determining 
what  "  each  class  of  service"  should  pay  upon 
traffic  within  the  states  as  distinguished  from  that 
between  the  states ;  all  the  states  were  at  liberty  to 
make  requirements  which  in  one  way  or  another 
changed  the  net  revenue  of  the  roads.  All  of 
which  illustrates  the  real  helplessness  of  the  Inter- 
state Commerce  Commission  to  actually  "regulate." 
Clearly,  something  was  still  lacking. 

THE  MEANING  OE  REGULATION 

Let  us  get  down  to  fundamentals ;  back  to  the 
intent  and  real  meaning  of  things.  If  you  will 
look  at  Webster,  you  will  find  these  definitions  of 
the  word  "  regulate  " : 

u  To  adjust  by  rule  or  method." 

"  To  put  in  good  order." 

u  To  adjust  or  maintain  with  respect  to  a  desired  condi- 
tion." 

u  To  regulate  a  watch  or  clock,  to  adjust  its  rate  of 
running  so  that  it  will  keep  approximately  standard 
time." 

The  carriers  and  the  public  have  suffered  because 
they  have  not  really  obtained  regulation  according 
to  the  intent  and  meaning  of  that  much-used  word. 
Don't  take  my  statement  for  it,  but  let  me  read  to 
you  an  extract  from  a  recent  report  of  the  House 
Committee  on  Interstate  and  Foreign  Commerce 
upon  a  resolution  providing  a  joint  committee  of 
inquiry  into  the  whole  problem  of  transportation — ' 

[5] 


similar  to  the  Monetary  Commission — a  resolution 
which  has  already  passed  the  Senate  and  is  expected 
soon  to  pass  the  House  :* 

"  Since  the  approval  of  the  act  to  regulate  commerce  in 
1887  the  system  has  had  a  gradual  and  irregular  growth  by 
various  and  sometimes  sporadic  amendments,  some  of  them 
making  decided  if  not  radical  changes  in  the  original  plans 
and  policies  and  some  of  them  adding  new  and  important 
activities.  So  that  the  entire  law  to  regulate  commerce  now 
in  force  is  not  a  uniform,  compact,  symmetrical  structure 
easily  understood,  but  is  an  incoherent  growth,  sometimes 
inconsistent,  in  some  parts  hardly  reconcilable,  and,  to  say 
the  least  of  it,  the  diversities  and  incongruities  should  be 
carefully  considered  and  wherever  possible  unified  and 
improved,  to  the  end  that  the  Federal  regulation  of  carriers 
may  be  successfully  carried  on  with  the  best  possible  service 
to  the  public.  .  .  .  It  is  the  earnest  hope  of  every  mem- 
ber of  your  committee  that  the  investigation,  if  ordered,  shall 
be  directed  to  the  detection  of  defects  in  the  system,  the 
establishment  of  truth  as  to  the  best  way  to  remedy  these 
defects,  and  the  perfection  of  the  system  for  the  increased 
convenience  and  prosperity  of  the  people  in  every  way  that 
human  legislative  wisdom  can  accomplish  perfection  in 
anything/' 

President  Wilson,  in  writing  about  transporta- 
tion in  1914,  said,  among  other  things : 

"They  (the  railroads)  are  indispensable  to  our  whole 
economic  life,  and  railway  securities  are  at  the  very  heart  of 
most  investments,  large  and  small,  public  and  private,  by 
individuals  and  by  institutions." 

And  in  addressing  Congress  on  December  8,  1915, 
he  said,  in  recommending  the  Special  Committee 
above  mentioned: 

"It  (transportation)  is  obviously  a  problem  that  lies  at 
the  very  foundation  of  our  efficiency  as  a  people.  .  .  . 
The  question  is  whether  there  is  anything  else  we  can  do 
that  would  supply  the  effective  means  in  the  very  process  of 
regulation  for  bettering  the  conditions  under  which  the  rail- 
roads are  operated  and  for  making  them  more  useful  servants 
of  the  country  as  a  whole.  .  .  .  For  what  we  are  seeking 
now,  what  in  my  mind  is  the  single  thought  of  this  message 
is  national  efficiency  and  security." 


*  Resolution    passed    by  the  House  of    Representatives    July    15,   1916,    and 
approved  by  the  President  July  20,  1916. 

[6] 


You  will  perceive  that  I  am  not  giving  you  my 
own  views,  but  those  of  great  leaders  of  thought  in 
this  country.  Senator  Underwood,  of  Alabama, 
said  in  an  address  at  Chicago  on  ^February  4, 1916 : 

li  We  must  recognize  that  the  man  who  is  willing  to  invest 
his  money  at  a  moderate  rate  of  interest  in  railroad  securities 
is  not  exploiting  the  public  but  is  a  public  benefactor." 

"  We  must  solve  the  problem  along  lines  of  private  own- 
ership and  Government  regulation.  We  must  consider  the 
wisdom  of  substituting  one  master  for  the  forty-nine  masters 
that  regulate  our  commerce  today." 

Colonel  Roosevelt  and  Mr.  Taft  have  made 
almost  identical  statements  in  clear  and  unmistak- 
able terms,  and  Mr.  Hughes  said  immediately 
after  his  nomination : 

"  We  must  rescue  our  instrumentalities  of  interstate  and 
foreign  commerce,  our  transportation  facilities,  from  uncer- 
tainty and  confusion.  We  must  show  that  we  know  how  to 
protect  the  public  without  destroying  or  crippling  our  pro- 
ductive energies." 

SERVING  MANY  MASTERS 

The  "Locomotive  Engineers' Journal,"  official 
organ  of  the  75,000  railroad  engineers,  said  not 
long  ago : 

u  The  railroads  are  almost  wholly  interstate  in  character, 
and  it  requires  little  thought  to  realize  how  unsatisfactory 
and  unbusinesslike  it  makes  the  conditions  for  the  railroads 
with  a  commission  in  every  state  demanding  all  sorts  of  con- 
ditions from  the  roads. 

"  The  great  thoroughfares  should  have  one  boss  instead 
of  forty-nine,  and  the  rate  making  should  be  done  by  one 
factor  of  the  Government,  so  that  a  survey  of  the  whole 
territory  may  be  before  them,  when  all  the  varied  conditions 
can  be  readily  seen,  and  rates  made  that  are  just,  both  to  the 
shipper  and  the  railroads. 

"  No  other  kind  of  business  could  live  under  such  unknown 
and  unfixed  conditions." 

The  Massachusetts  Public  Service  Commission, 
in  reporting  not  long  ago  on  the  New  Haven  road, 
after  an  exhaustive  inquiry,  made  this  statement : 


"  The  whole  legal  question  is  so  difficult,  so  entangled  and 
confused  by  conflicting  claims  and  rights,  that  it  raises 
serious  doubts  as  to  the  wisdom  of  the  system  from  which  it 
arose.  No  man  can  serve  two  masters.  Is  there  public 
advantage  in  compelling  a  corporation  to  serve  three  or 
more  ?  A  system  tinder  which  a  single  undivided  corpora- 
tion is  at  the  same  time  three  separate  corporations  is  wholly 
illogical  and  seems  contrary  to  good  order  and  reason. " 

Formerly,  wages  and  rate  matters  were  dealt 
with  in  a  rather  lawless  way  by  shippers,  employes 
and  individual  roads,  but  in  the  last  few  years 
there  has  been  an  evolution ;  both  wages  and  rates 
have  been  considered  regionally,  and  now,  for  the 
first  time,  the  train  service  employes  are  insisting 
that  their  wages  shall  be  considered  on  a  nation- 
wide basis. 

Industrial  and  commercial  bodies  all  over  the 
country,  recognizing  the  great  need  for  unified  and 
more  efficient  regulation  of  transportation,  have 
passed  significant  resolutions  during  the  present 
year  calling  upon  Congress  for  investigation  and 
relief.  The  Merchants  Association  of  New  York, 
the  Chamber  of  Commerce  of  Philadelphia,  the 
National  Manufacturers  Association,  the  National 
Lumber  Dealers  Association,  the  Southern  Pine 
Association,  National  Leather  Association,  Ameri- 
can Hardware  Manufacturers  Association  and 
many  similar  organizations  of  wide  influence  in 
the  business  world  have  expressed  themselves 
vigorously  to  this  effect. 

So  under  our  very  eyes  this  thing  has  come  to 
pass.  Men  of  all  classes  and  of  all  shades  of 
political  opinion  are  declaring  that  the  transporta- 
tion question  is  a  national  problem, — not  a  local 
issue.  Now,  if  you  and  other  shippers,  and  the 
people  who  travel  in  passenger  trains  or  who 
receive  mail  and  parcels  post  carried  by  the  rail- 
roads, and  railway  directors  and  officials  are  all 
agreed  that  the  propriety  of  regulation  is  no  longer 

[8] 


in  dispute — surely  all  of  us  together  ought  to  be 
able  to  search  our  hearts,  ascertain  our  paramount 
duty,  get  down  to  business  and  discuss  the  whole 
question  from  the  viewpoint  of  the  public  interest. 

PERTINENT  QUESTIONS 

We  may,  therefore,  ask  ourselves : 

Is  it  in  the  public  interest  that  the  railroads  of 
this  country  are  required  to  make  over  two  million 
reports  per  annum  to  various  federal  and  state 
tribunals  ? 

Is  it  in  the  public  interest  that  passenger  rates 
are  only  two  cents  a  mile  in  some  states  and  higher 
in  more  populous  states'?  And  in  considering  this 
question  will  not  the  most  obvious  thing  to  the 
public  be  the  cost  and  comfort  of  the  passenger 
equipment  of  to-day  as  compared  with  twenty 
years  ago  ? 

Is  it  in  the  public  interest  that  wagon-loads  of 
testimony  be  submitted  to  various  state  tribunals— 
at  a  cost  of  millions  of  dollars  to  the  railroads  and 
the  public — to  prove  that  rates  ought  to  be  higher, 
or  ought  not  to  be  reduced,  resulting  in  adverse 
decisions  after  a  corresponding  laborious  inquiry 
by  the  Interstate  Commerce  Commission,  which 
resulted  in  the  finding  that  charges  are  inadequate 
and  that  passenger  traffic  is  not  paying  its  share  ? 

Is  it  in  the  public  interest  that  some  states  pass 
inharmonious  head-light  laws,  boiler  inspection 
laws,  extra-crew  laws  and  other  laws  affecting  oper- 
ation while  other  states  are  refusing  to  pass  them  ? 

Is  it  in  the  public  interest  that  compensation 
paid  by  one  shipper — the  Post  Office  Department- 
is  determined  without  submission  to  the  Interstate 
Commerce  Commission  when  other  shippers  are 
deprived  of  such  a  privilege  $* 

•Since  this  address  was  delivered,  authority  to  determine  compensation,  for 
railway  mail  pay  has  been  conferred  upon  the  Interstate  Commerce  Commission. 

[9] 


Is  it  in  the  public  interest  that  public  service 
corporations  are  required  by  divided  authority  to 
violate  the  spirit  if  not  the  letter  of  Section  Two  of 
Article  Eour  of  the  Constitution  of  the  United 
States,  which  declares  that : 

u  The  citizens  of  each  state  shall  be  entitled  to  all  privi- 
leges and  immunities  of  citizens  in  the  several  states." 

Is  it  in  the  public  interest  that  public  tribunals 
have  said  in  some  cases  that  rates  by  one  line  may 
be  higher  than  another  because  the  cost  of  opera- 
tion is  higher,  thereby  penalizing  superior  location 
and  construction'?  If  so,  what  incentive  is  there  to 
build  better  roads,  or  improve  existing  roads  ? 

Is  it  just  that  wages  of  steel  workers,  coal 
miners  and  others  be  voluntarily  increased  by 
employers  and  these  increases  then  passed  along  to 
the  consumer,  including  the  railroads,  the  largest 
purchasers  of  such  commodities,  unless  similar 
flexibility  be  accorded  to  railroad  investors  and 
nearly  two  million  employes  ?  If  not,  what  is  the 
alternative  ? 

Beside  innumerable  difficulties  like  those  men- 
tioned, there  are  confusing  Anti-Trust  Laws  of 
various  states  as  well  as  the  Federal  Government. 
These  laws  not  only  conflict  with  each  other,  but 
are  quite  inconsistent  with  competent  regulation; 
they  have  cost  millions  of  dollars  in  litigation 
and  have  prevented  many  economies  in  transpor- 
tation. Nowhere  else  in  the  world  do  railroads 
have  this  handicap. 

MILLIONS  GOING  OVER  THE  DAM 

In  consequence  of  all  these  wasteful  things, 
millions  upon  millions  of  dollars  which  ought  to 
be  saved  for  somebody,  are  going  over  the  dam 
every  year,  and  warrant  the  query  whether  there 

[10] 


is  any  more  wisdom  in  disembarking  railroad  cor- 
porations at  state  lines  than  there  would  be  in  dis- 
embarking passengers  and  freight  or  changing 
wages  at  state  lines.  Who,  for  example,  would 
think  of  advocating  a  Post  Office  Department  for 
each  state  in  the  Union  1 

Is  it  not  your  duty  and  mine  to  cut  out  waste 
wherever  we  can,  no  matter  how  prosperous  we 
may  be? 

The  net  result  of  conditions  such  as  I  have 
enumerated  is  that  individual  states  are  under  the 
guise  of  "regulation"  actually  disorganizing  com- 
merce, and  are  shifting  to  other  states  burdens  of 
railway  credit  which  the  latter  ought  not  to  assume. 
They  are  in  reality  requiring  railway  corporations 
to  do  what  the  Federal  law  prohibits  them  from 
doing,  that  is  to  discriminate  between  persons 
and  places.  This  encourages  litigation  and  is 
wasteful  in  every  way. 

LOCOMOTOB,  ATAXIA— 
NOT  REGULATION 

The  fact  is,  we  haven't  had  u regulation"  at  all. 
It  is  locomotor  ataxia.  If  you  will  look  again  at 
the  dictionary,  you  will  see  locomotor  ataxia 
described  as: 

"  A  disease  of  the  spinal  chord  characterized  by  peculiar 
disturbances  of  gait,  and  difficulty  in  co-ordinating  voluntary 
movements." 

Surely  Webster  must  have  had  the  railroads  in 
mind  when  he  wrote  that !  The  railroads  may  be 
likened  to  the  spinal  chord  of  our  industrial  and 
commercial  life.  Congress  can  and  should — 
without  any  Constitutional  amendment — act  in 
these  matters  in  behalf  of  all  the  states  and 
"co-ordinate"  the  railroads.  The  small  number  of 
people  who  would  be  thrown  out  of  political 
employment  are  as  nothing  in  the  balance  to  the 


millions  who  would  be  benefited.  In  fact,  State 
Public  Service  Commissions  would  still  have  quite 
enough  to  do  in  supervising  street  car  lines,  light- 
ing companies,  water  companies  and  local  regula- 
tions affecting  railway  operation.  Any  fear  of  too 
much  centralization  could  be  easily  overcome  by 
regional  commissions,  and  the  best  State  Commis- 
sioners, if  promoted  to  such  Eederal  positions, 
could  render  far  greater  service,  and  more  satisfac- 
torily to  themselves,  than  is  possible  under  their 
present  limitations. 

If  we  can  mobilize  the  strength  of  the  banks 
regionally,  why  not  also  the  railroads  ?  The  people 
of  the  states  'would  be  better  served  and  better 
protected,  for  no  merchant  or  producer  is  willing  to 
be  restricted  to  his  own  state  in  comfortable  travel 
or  in  commercial  opportunity.  Our  state  lines  are 
not  the  "  frontiers "  of  forty-eight  separate  coun- 
tries, and  the  people  care  nothing  for  state  lines  on 
the  map,  or  for  theoretical  state  sovereignty,  when 
they  want  to  do  business  with  each  other. 

RELATION  OP  RAILWAY  CREDIT 
TO  ADEQUATE  SEEYICE 

Not  long  ago  I  heard  an  after-dinner  speaker 
say :  "  The  railroads  must  be  taken  out  of  the  field 
of  speculation."  I  do  not  know  just  how  this  is 
to  be  accomplished,  unless  by  Government  guaran- 
ties, but  certainly  the  business  ought  to  be  relieved 
of  the  speculative  risks  of  conflicting  treatment  by 
public  authorities. 

Railway  investors  are  quite  willing  to  take 
their  chances  with  the  other  people  of  this  country. 
They  do  not  have  any  problems  except  so-called 
regulation  that  you  have  not.  You  have  your 
puzzles  about  wages,  about  fluctuations  of  crops, 

[12] 


about  demand  and  supply  and  many  other  things. 
The  railroad  investor  takes  "pot-luck"  with  you 
but  is  timid,  even  in  prosperous  seasons,  about  the 
one  thing  with  which  he  has  to  contend  and  with 
which  you  do  not;  that  is,  bewildering  artificial 
limitations  on  profits.  He  is  quite  willing  to  have 
supervision  of  railway  securities,  but,  naturally, 
thinks  that  the  machinery  should  be  simple  and 
prompt  and  the  Federal  Government  should  act  in 
behalf  of  all  the  states  in  regulating  the  instru- 
mentalities of  commerce. 

Right  now  nineteen  states  are  trying  to  regu- 
late the  issuance  of  securities,  and  no  two  of  the 
regulations  are  alike.  If  you  were  a  banker,  how 
long  would  you,  with  present  opportunities  for 
making  money,  tie  up  your  funds  or  your  cus- 
tomers' funds,  waiting  for  " consents"  of  various 
tribunals,  some  of  which  impose  a  heavy  special 
tax  on  this  "privilege"  of  devoting  money  to 
public  use — although  the  proceeds  of  the  securities 
may  be  largely  spent  in  other  states  ? 

*So  railway  regulation  can  really  put  the 
machine  "  in  order  "  that  does  not  comprehend  the 
question  of  railway  credit.  Facilities  must,  of 
course,  precede  service  and  credit  must  precede 
facilities.  Our  railroads  should  always  be  ahead 
of,  not  behind,  the  growth  of  the  nation.  In  this 
connection,  may  I  bring  to  your  attention  just  one 
graphic  statement  ?  The  debt  of  the  railways  of 
this  country  is  now,  roughly  speaking,  about  Ten 
Billion  Dollars.  The  stock  amounts  to  about  Six 
Billion  Dollars.  Now,  how  long  would  your 
bankers  do  business  with  you  if  you  were  attempt- 
ing permanently  to  borrow  ten  dollars  for  every 
six  you  put  in  the  business  yourself  ?  Manifestly, 
the  financial  condition  of  the  railroads  will  become 
more  and  more  unsound  and  more  and  more  diffi- 

[13] 


cult  and  expensive  unless  future  financing  is  done 
more  with  stock  and  less  with  debt. 

Millions  of  people  are  as  dependent  upon  weak 
roads  as  other  people  are  upon  the  strong  ones. 
For  example,  take  the  Southwest.  A  large  part  of 
its  railroads  are  in  bankruptcy.  Surely  that  is  not 
all  due  to  bad  management.  How  much  of  it  is 
due  to  unwise  regulation,  how  much  to  unsound 
laws  about  financing,  and  how  much  to  other 
things?  Could  any  Congressional  action  be  of 
greater  service  than  to  do  whatever  is  necessary  to 
safeguard  and  strengthen  all  railway  credit? 

Railway  net  returns  for  the  fiscal  year  j  ust  ended, 
although  it  showed  the  largest  gross  earnings  in 
their  history,  were  equivalent  to  about  5J$  on  the 
property  used  by  the  public — surely  not  exorbitant. 
Is  there  any  prosperous  private  business  in  the 
world  that  yields  so  small  a  return  ?  In  1913,  the 
return  was  about  5$ ;  in  1914,  about  4$ ;  in  1915, 
about  4$.  I  am  speaking  of  the  railroads  as  a 
whole;  not  even  a  unified  regulation  can  be  suc- 
cessful if  it  is  not  to  make  weak  roads  healthier 
and  more  serviceable,  nor  can  it  be  successful  if 
based  on  returns  of  prosperous  years  only. 

In  no  business  is  it  conservative  to  draw  out 
every  year  all  of  the  profits.  How  long  would 
your  bankers  be  cordial  if  you  were  to  withdraw 
every  year  all  of  your  gains,  instead  of  building  up 
reserves  or  adding  to  the  real  value  of  your  assets  ? 

COMPENSATION  FOR  SERVICE 

I  have  said  that  I  am  not  here  to  apologize  for 
the  railroads,  nor  am  I  here  to  boast ;  but  perhaps  I 
may  give  you  one  or  two  illustrations :  The  average 
passenger  train  in  this  country  earns  for  carrying 
passengers,  mail,  express  and  parcels  post  about 
$1.40  per  mile.  The  average  equipment  of  loco- 

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motive  and  cars  provided  for  this  probably  weighs 
about  500  tons  and  is  projected  through  space  at  a 
speed  varying  from  20  to  60  miles  per  hour.  That  is 
to  say,  a  500-ton  train  of  steel,  plate  glass,  expensive 
woodwork,  electric  lights,  etc.,  costing  $200,000  or 
more,  is  projected  twelve  miles  at  high  speed  for 
the  price  of  a  ton  of  hay.  Do  you  happen  to  know 
of  any  equivalent  service  for  less  money  ? 

Again,  as  I  have  illustrated  in  the  past :  If  you 
should   write   a   letter   to   an   American   railroad 
official,  his  company  will  have  to  haul  a  ton  of 
freight — two  thousand  pounds  of  average  freight- 
coal,  ore,  silks,  ostrich  feathers,  and  everything— 
for  more  than  two  and  one-half  miles  to  get  money 
enough  to  buy  a  postage  stamp  to  send   you  an 
answer.     Out  of  that  kind  of  service  the  company 
must  pay  its  employes,  buy  its  materials,  pay  its  rents 
and  taxes,  interest  on  its  debt,  and  make  its  living. 

Let  me  also  quote  from  a  recent  statement  of 
W.  M.  Acworth,  a  distinguished  English  writer  on 
railway  economics.  He  said : 

"  This  is  my  tenth  visit  to  the  United  States,  of  whose 
railway  affairs  I  have  been  for  about  thirty  years  a  diligent 
student.  Every  time  I  am  brought  into  contact  with  Ameri- 
can railways,  the  overpowering  impression  produced  on  my 
mind  is  of  the  marvelous  results  which  the  efficiency  of  the 
railroad  men  produces  with  the  minimum  expenditure  both 
of  capital  and  income." 

NATIONAL   CONSCIOUSNESS 

A  very  helpful  American  writer  has  said : 

"  A  nation  is  made  great  not  by  its  fruitful  acres  but  by 
the  men  who  cultivate  them ;  not  by  its  great  forests  but  by 
the  men  who  use  them ;  not  by  its  mines  but  by  the  men  who 
work  in  them;  not  by  its  railways  but  by  the  men  who  run 
them.  America  was  a  great  land  when  Columbus  discovered 
it ;  Americans  have  made  of  it  a  great  nation." 

I  am  sure  you  will  not  censure  me  for  remind- 
ing you  that  we  are  a  great  nation,  not  a  federation 
of  tribes.  Never  before  has  there  been  such  a 

[15] 


national  consciousness.  The  word  "National"  in 
the  name  of  your  Association  signifies  something, 
and  I  venture  the  hope  that,  when  the  Congres- 
sional inquiry  to  which  I  have  referred  is  inaugu- 
rated, all  of  us  will  join  hands  in  doing  what  the 
House  Committee  suggested,  in  the  quotation  I 
have  made,  to  wit:  seek  "the  establishment  of 
truth  as  to  the  best  way  to  remedy  defects  and  the 
perfection  of  the  system  for  the  increased  confidence 
and  prosperity  of  the  people." 

Your  co-operation  will  help  our  statesmen  to  do 
for  the  railroads  of  this  country,  and,  therefore,  for 
the  whole  people,  as  fine  a  piece  of  constructive 
work  as  has  already  been  done  for  the  banks.  We 
should  be  as  proud  of  safe  and  prosperous  railroads, 
as  of  safe  and  prosperous  banks ;  we  must  have  both 
if  we  are  to  keep  pace  with  the  great  expansion 
ahead  of  us,  to  say  nothing  of  our  normal  growth. 

The  opportunity  of  this  generation — your  oppor- 
tunity  and  mine — is  to  serve  our  country  by  pro- 
moting  national  unity.  The  paramount  "  state 
right"  is  to  be  part  of  the  Union.  Nothing  will 
promote  national  unity  more  than  unified  and 
consistent  regulation  of  transportation,  which,  as 
President  Wilson  has  suggested,  is  "  the  one  com- 
mon interest  of  our  industrial  life."  It  is  a 
fascinating  task,  and  it  is  most  gratifying  that 
all  the  multiplying  signs  of  mutual  friendliness 
and  appreciation  are  so  favorable  to  its  accom- 
plishment. 


[16] 


